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Purchasing from distributors in USA as a Canadian

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VisionNN

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Hey guys,

Currently my business is in Canada purchasing from Canadian distributors but i'm looking to expand and begin working with distributors in the US.

I read that you need a reseller license in order to purchase items without paying tax. From what i understand, the reseller license is basically an EIN. Did i understand that correctly? Furthermore, in order to obtain this EIN, i need to register my business in a state to receive a tax ID number.

Other sources i read say i don't need to register for an EIN as my business already has a GST/HST number in Canada. The conflicting information is becoming a bit confusing.

Before i reach out to a tax lawyer or someone who specializes in this, anyone have any experience doing business in the US as a foreign company?

If it makes a difference, my company sells in both Canada and the US but the products i will be sourcing in the US will be sold in the US. They will NOT be imported into Canada.

Thanks!
 

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pashka

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Jun 24, 2018
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Hi @VisionNN,
I guess it's been a while and you might've figured out this stuff already. I'm dealing with the same problem myself now. From the looks of it, it seems like:
- reseller certificate is not a EIN.
- reseller certificate is state specific (but most states seem to accept other state certificate, although some don't)
- seems like obtaining a reseller certificate obligates you to file taxes with that state (although I'm confused here as if other states accepts same certificate does it mean you need to file taxes with all of them? :wideyed:). To file taxes you'd need a EIN number as that's how IRS identifies who's paid what.

I'm figuring it out slowly, it's quite confusing to be honest
 

VisionNN

Bronze Contributor
Read Millionaire Fastlane
Speedway Pass
Mar 6, 2016
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186
139
Hi @VisionNN,
I guess it's been a while and you might've figured out this stuff already. I'm dealing with the same problem myself now. From the looks of it, it seems like:
- reseller certificate is not a EIN.
- reseller certificate is state specific (but most states seem to accept other state certificate, although some don't)
- seems like obtaining a reseller certificate obligates you to file taxes with that state (although I'm confused here as if other states accepts same certificate does it mean you need to file taxes with all of them? :wideyed:). To file taxes you'd need a EIN number as that's how IRS identifies who's paid what.

I'm figuring it out slowly, it's quite confusing to be honest

Hey Pashka,

Sorry for the late response, i dont go on here too often.

I've actually not crossed this bridge yet primarily because i've been so busy in Canada but i'm planning to open a physical location in the US early 2020 so will revisit then.

From what i understand, you will need to obtain a reseller certificate in whichever state you're located. You dont need a separate one from each state. EIN will be used as a business registration number and also used for taxes.

As for filing taxes, i think it all depends on where you have a nexus and where you made sales. If you have customers that made purchases in a state, i think you're legally required to collect tax in that state and thus reporting tax in that state. Others say that it all depends where your distribution hub is so if you're only sending from that hub then thats the only place you need to collect tax in.

If you have the money, my suggestion would be to consult with a business tax attorney. That's what i'll be doing come in the new year.
 

AgainstAllOdds

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If you have the money, my suggestion would be to consult with a business tax attorney.

Why?

A cheap way to answer all your questions: Find a local customs broker. Ask them all the questions you want about importing from the U.S.

I have a shipment going straight from the factory overseas to a client in Toronto. I told my broker: I don't want to think about the transaction. Can you figure out how to do everything? So far it seems like they did. Most of the paperwork bs is on them. Importing into Canada, that's on them. They make a cut on the freight, and I don't want to deal with it.

As for purchasing without tax, there should be no tax on the seller's behalf if the shipment's going into Canada. There's NAFTA. In the U.S., if the shipment leaves the state, you typically don't have to pay tax. If it's going into Canada, there should be no tax. Instead there's bs paperwork that you have to figure out. I'd just hire someone that's happy making a couple hundred on the deal to figure it all out for you.
 

VisionNN

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Read Millionaire Fastlane
Speedway Pass
Mar 6, 2016
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139
Why?

A cheap way to answer all your questions: Find a local customs broker. Ask them all the questions you want about importing from the U.S.

I have a shipment going straight from the factory overseas to a client in Toronto. I told my broker: I don't want to think about the transaction. Can you figure out how to do everything? So far it seems like they did. Most of the paperwork bs is on them. Importing into Canada, that's on them. They make a cut on the freight, and I don't want to deal with it.

As for purchasing without tax, there should be no tax on the seller's behalf if the shipment's going into Canada. There's NAFTA. In the U.S., if the shipment leaves the state, you typically don't have to pay tax. If it's going into Canada, there should be no tax. Instead there's bs paperwork that you have to figure out. I'd just hire someone that's happy making a couple hundred on the deal to figure it all out for you.

My situation is a little different. I'm not looking to just export, i'm looking to physically setup a location in the US in addition to my Canadian location.
 

AgainstAllOdds

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My situation is a little different. I'm not looking to just export, i'm looking to physically setup a location in the US in addition to my Canadian location.

Each state has different forms. If you're buying from a supplier out of state, typically there's no tax. If it's in state, then you do need a Reseller's License. Sometimes it's called something a little different (certificate, etc).

I'd speak with an accountant that handles incorporation. They don't charge much. Ask them how to register for the certificate. The registration process is the same as when you register your LLC. Just a different form.
 

pashka

Contributor
Read Millionaire Fastlane
Jun 24, 2018
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Toronto
Hey Pashka,

Sorry for the late response, i dont go on here too often.

I've actually not crossed this bridge yet primarily because i've been so busy in Canada but i'm planning to open a physical location in the US early 2020 so will revisit then.

From what i understand, you will need to obtain a reseller certificate in whichever state you're located. You dont need a separate one from each state. EIN will be used as a business registration number and also used for taxes.

As for filing taxes, i think it all depends on where you have a nexus and where you made sales. If you have customers that made purchases in a state, i think you're legally required to collect tax in that state and thus reporting tax in that state. Others say that it all depends where your distribution hub is so if you're only sending from that hub then thats the only place you need to collect tax in.

If you have the money, my suggestion would be to consult with a business tax attorney. That's what i'll be doing come in the new year.

Thanks @VisionNN
Definitely hiring someone who knows this whole stuff makes sense down the road. The reason I asked about multiple resale certificates is that I've read (7 Things Resellers Need to Know about Resale Certificates) some states (9 or so, including Washington DC) won't accept certificate from another state.
 

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